Clause 64 - Promotion of reductions in carbon emissions: gas transporters and suppliers

Energy Bill [Lords] – in a Public Bill Committee at 1:00 pm on 16th June 2011.

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Question (this day) again proposed, That the clause stand part of the Bill.

Photo of David Crausby David Crausby Labour, Bolton North East

I remind the Committee that with this it will be convenient to discuss the following:

New clause 23—Duty of Secretary of State to make regulations regarding the installation of energy efficiency measures by energy suppliers—

‘(1) For the purposes of requiring energy suppliers to assist in combating fuel poverty by the reduction of home heating costs and to meet carbon dioxide reduction targets the Secretary of State must within twelve months of the passing of this Act make regulations establishing a scheme requiring energy suppliers to install specified energy efficiency measures in residential properties.

(2) Regulations made pursuant to this section must specify:

(a) the energy measures to be included;

(b) that priority for installation of those measures shall be given to the homes of persons living in fuel poverty;

(c) the carbon dioxide reduction target to be achieved as a result of those measures; and

(d) such other matters that are in the opinion of the Secretary of State required for the setting up and operation of the scheme.

(3) In this section:

“fuel poverty” has the same meaning as in the Warm Homes and Energy Conservation Act 2000.

“energy suppliers” means any person licensed to supply electricity pursuant to the Electricity Act 1989 and any person licensed to supply gas pursuant to the Gas Act 1986.’.

New clause 39—Supplementing the Energy Company Obligation

‘(1) The Secretary of State must, within six months of this Bill receiving Royal Assent, report to Parliament with proposals on the ways in which the Energy Company Obligation could be supplemented by—

(a) auction revenues from the European Union Emissions Trading System,

(b) revenues from the Carbon Floor Price, and

(c) such other funds as considered appropriate by the Secretary of State.’.

This New Clause requires the Secretary of State to produce a report on the potential for using public funds to supplement the Energy Company Obligation.

Photo of Alan Whitehead Alan Whitehead Labour, Southampton, Test

Someone has mentioned to me that before the break they heard me state that I wished to peel an otter. I assure hon. Members that I have no intention of doing that; I would not wish to get into trouble with animal rights lobbies. I was talking about piling Pelion on Ossa, which is what I was about to do. The carbon emissions reduction target is popularly supposed to have stayed outside the definition of imputed taxation; while that might have been an indication that its successor, the energy company obligation, will also stay outside it, that is not the case. CERT has never been looked at by the Office for National Statistics; indeed, I understand that CERT has just been referred to the ONS classification committee for precisely that purpose, so it is conceivable that if the ONS classification committee decides that CERT is indeed imputed taxation, it could come within a framework before CERT runs out at the end of 2012.

With regard to the upcoming potential range of funding for ECO, not only do we not know what the extent of the funding might be; we may well find that the funding, for reasons outside the control of the Department of Energy and Climate Change, is seriously circumscribed for the future. That is why it is doubly important that we are clear about what the overall priority for ECO is.

On occasion I have referred to the little diagram in the booklet produced by DECC that accompanies the Committee’s deliberations. It talks about green deal finance. The circle below that refers to

“the next most cost-effective measures”.

That relates to hard-to-treat homes. Then there is a reference to the ECO subsidy and measures providing affordable warmth to the vulnerable. That makes clear the idea that there could be two purposes for ECO—indeed, one might say two and a half purposes, inasmuch as it is certainly true that a disproportionate number of those hard-to-treat homes will be homes in which people who are vulnerable and fuel-poor live.

However, without a target arrangement as far as ECO is concerned, bearing in mind the limitations that there may well be on its budget, it is more than possible that the diagram in the document will end up with most of the second circle of ECO subsidy, or perhaps all of it, being taken up by the next most cost-effective measures, particularly as the document itself, as I have previously mentioned, states:

“The Committee on Climate Change recommended in their 2009 Report, ‘Meeting Carbon Budgets—the need for a step change’, that 2.3 million solid wall homes will need to have taken up solid wall insulation by 2022 in order for the UK to be on track to achieve carbon budgets.”

It may well be, as my hon. Friend the Member for Liverpool, Wavertree, has illustrated, that most of the homes that could be insulated by 2022 could be solid wall homes in which people in fuel poverty live. She referred to 1.9 million homes falling into that category. Even that figure is way outside what looks like the current funding envelope for the ECO. If we do the mathematics on the cost per home to install solid wall insulation, even that measure would require, according to the report from the Committee on Climate Change, far more funding than we think is likely for ECO in that period. That should be revisited.

The absolutely essential campaign on homes that are hard to treat and do not have cavity walls may need other forms of assistance behind it, in addition to ECO,  if we are to reach the target. The purpose of ECO may be to deal with some solid wall homes, but essentially it is to support people who are vulnerable and in fuel poverty, and who may not be able to access the green deal due to their particular circumstances. As has been emphasised, if they accessed the green deal, they would, by and large, do so not to save money on their fuel bills, but so that they could heat their homes to acceptable standards of warmth, so that they were not cold, under-heated and deprived of a decent temperature in their homes.

Fundamentally, that aim runs over the question of the golden rule. If we had the provision in the Bill, it would give important clarification on where the ECO is going. It would also be an enormous help for those people who are already preparing to get under way; it would allow them to anticipate what the ECO will do. I spoke at a conference yesterday, and the lack of clarity about what the ECO will do was a widespread concern among those in the practical business of thinking about how to go along with green deal proposals, what role the green deal may play in that, and the extent to which the green deal will work in tandem with ECO where people are vulnerable and fuel-poor. The new clause has an enormous amount to commend it. I hope that the Minister will at least feel able to clarify, for all our sakes, where the ECO is going, and to accept it as an addition to the Bill.

Photo of Tom Greatrex Tom Greatrex Shadow Minister (Scotland)

I am grateful for the opportunity to make a few remarks about the ECO in relation to new clause 23 and clause 64. We have heard from members of the Committee—and, I think, from the Minister in an earlier sitting—about the split between the two areas that the ECO is intended to address. Various people have talked about Venn diagrams and how big the crossover part in the middle is. It is well understood that there is a degree of crossover; some hard-to-heat homes are inhabited by people who are fuel-poor.

On a number of occasions, including on Second Reading, I have raised the point, with regard to the development of the green deal, about hard-to-heat homes in my constituency and the constituencies of many others. In the part of the world that I represent, there are a lot of stone-built properties with high ceilings and big, draughty windows. Often, they are tenement properties; people who are familiar with Glasgow and Edinburgh will know of them. I just place on record that I do not represent Glasgow, in case any of my constituents read this contribution. Rutherglen is very different from Glasgow, although it is next to it. The properties are very similar, and were built by the same people at around the same time. They are hard to heat; they do not have lofts and often do not have walls suitable for cavity-wall insulation. However, a lot of them are social housing. Even those that are not are flats rather than large houses, and the occupiers are fuel-poor. That is where priority should be aimed.

I understand the point made earlier in response to the hon. Member for Brighton, Pavilion: this is a 10-year programme. We are talking about a possible £20 billion over 10 years. However, how we start is important. If the amount is in the order of £2 billion a year, we should start with people in fuel poverty, some of whom will be in hard-to-heat homes. That will give a degree of certainty, to refer to what my hon. Friend the Member  for Southampton, Test, said about the discussions he has had. It is also important to set the priority for the Government. As time goes on and some of the issues are dealt with, it might be possible to extend the programme further to hard-to-heat homes where fuel poverty is not as acute an issue.

I also want to make a point referred to in the TV documentary mentioned by a number of hon. Members. This is not the direct responsibility of the Ministers here or of the policy that we are discussing, but dealing with fuel poverty can have a huge positive impact on other areas of public policy where there might be public spending implications, such as health and social care. There is a benefit for public policy and the Government in putting that initial focus on people who are fuel-poor.

I have a couple of points to make about the ECO, on which I have received representations from a Scottish perspective that may not have come to the attention of Ministers and their officials. I grew up in south-east England and have lived in Scotland for eight or nine years, and for the past year I have had the bizarre existence, as many of us have, of being in both one place and another. I cannot remember the quote that the Minister gave earlier to describe being in two places. Even at this time of year, I know the difference in climate between central London and the west of Scotland. Only a couple of weeks ago, we had to have our heating on at home during the day, which people in this part of the world probably did not.

Photo of Tom Greatrex Tom Greatrex Shadow Minister (Scotland)

I will let the Minister explain to my wife and young children that they should be putting on more clothes. I will say that he told me that, and she will come and have a word. I will see whether the Minister survives that experience.

The serious point is that there is a difference, as is shown in studies. I appreciate that some of the studies are hard to quantify exactly, but there is an appreciable difference in the amount of money people spend on their fuel bills in the west of Scotland and the west of England. Some studies from before the recent price increases put that at about £120 a year. There is a significant difference, partly due to the climate and partly due to the styles of property.

If the ECO is to work to a UK-wide home heating cost reduction target, WWF Scotland and others are concerned about parts of the country where there will be differences. I am not sure whether the Minister has had an opportunity to address that. He will probably tell me that it will be part of what is looked at in more detail in the autumn. It would be useful to get an indication of what will happen in geographical areas—not just Scotland—where there are significant differences that will need to be addressed if the ECO is to be the successful antidote to the market mechanism that the Minister has talked about in the green deal. I would be grateful for the Minister’s comments.

Photo of Gregory Barker Gregory Barker The Minister of State, Department of Energy and Climate Change

It is a pleasure to see you back in the Chair, Mr Crausby. In the last sitting, the hon. Members for Ogmore, for Liverpool, Wavertree,  and for Brighton, Pavilion, spoke in favour of their new clauses, which are pertinent to clause 64. I will speak to those new clauses and clarify the purpose of clause 64.

I will take new clause 23 first and its emphasis on fuel-poor households. As I said in my introduction, the ECO will be introduced alongside the green deal in 2012 and will both address the needs of the fuel-poor and support households in hard-to-treat homes, saving carbon in the process. The hon. Member for Southampton, Test, referred to the diagram in the ECO document. I must point out that the even share between green deal finance and ECO subsidy, with the most cost-effective measures sitting evenly in between, is purely for illustrative purposes. It is in no way meant to be an accurate, to-scale model of the distribution of finances we anticipate.

Photo of Alan Whitehead Alan Whitehead Labour, Southampton, Test 1:15 pm, 16th June 2011

Perhaps I could confirm that, as I have previously pointed out, it does say,

“Note: Diagram is not to scale” in the bottom right-hand corner. I understand that point. My point was that because it is not to scale, what is where in those two circles is indeterminate.

Photo of Gregory Barker Gregory Barker The Minister of State, Department of Energy and Climate Change

The hon. Gentleman makes a good point. There is another point that has not come up in Committee. There has been an assumption that money is spent either in a prosperous, able-to-pay household or in a fuel-poor household. We are trying to be creative in looking at the ECO. It is entirely possible that we could end up subsidising the advancement of new technologies, but not at the point at which they are put into the household. Energy company partners could work on helping, either at the design or testing stage, to bring forward or scale up products that will have more than one application. For example, there has been little advancement in product design and economics in recent years on solid wall insulation or similar products, particularly for older properties which could be inhabited either by the fuel-poor—they often are—or people who are significantly wealthier. Working with the industry to identify how we can drive innovation and bring down costs in the product development stream is another possible avenue. It does not have to be a binary choice between subsidising a product at the point of installation in a wealthy person’s home or in the home of someone who is fuel-poor.

Photo of Luciana Berger Luciana Berger Shadow Minister (Energy and Climate Change)

Does that mean that the ECO could go directly to people developing products for the home?

Photo of Gregory Barker Gregory Barker The Minister of State, Department of Energy and Climate Change

That is exactly what I mean. In terms of product development, a move to subsidise either the roll-out or the scaling-up is entirely feasible. I am not saying that we will do that, but we are considering it. What is the best way to leverage up the subsidy? Is it to use it at the very end of the supply chain, at the point at which it is being installed in a home, or might a more discreet intervention earlier on in product development result in bringing to market cheaper, more effective products? We are keeping the door open on that. We should not just think that we have to pay full whack at the end of the supply chain process.

Photo of Caroline Lucas Caroline Lucas Leader of the Green Party

I am grateful to the hon. Member for Liverpool, Wavertree for getting that point clarified. While the Minister was speaking, I thought to myself, “He cannot possibly mean that there’s yet another call on this very small pot of money.” Of course, it is helpful to promote innovation, but the idea that the already hard-pressed pot of money, which, until now, most of us thought would be used primarily to help the fuel-poor immediately, will go on subsiding the industry to come up with more innovate products is deeply worrying.

Photo of Gregory Barker Gregory Barker The Minister of State, Department of Energy and Climate Change

Don’t get me wrong; I am not saying that the money will be an alternative source of research funding, but there is a point at which it could subsidise products with more than one application. By subsidising products that go into fuel-poor homes at scale, we would help to bring down the price of products that could then be installed in other properties. I am not saying that there will be a different type of funding, because we have budgets for research and development, but we should not believe that it will be a binary choice. The economic impact of helping to scale-up products that will go to the fuel-poor will have a knock-on economic effect on the availability of products.

The whole point of the green deal, creating a market framework and using the ECO is to inject investment and scale. We want to use a new framework to drive private sector investment into product development and create larger-scale investment that will bring down the cost of a whole suite of products. While the focus obviously remains on in-home applications, the cascading effect of that will be much wider than the simple binary choice between expensive products going into home A or cheap products going into home B.

Photo of Huw Irranca-Davies Huw Irranca-Davies Shadow Minister (Energy and Climate Change)

The Minister talks about driving investment into product development. That sounds very much like innovation, research and bringing forward new products. I wish to press him a little further, because that is a new departure for the Committee and its understanding of the ECO. How would the ECO money find its way to the private sector to develop such products, if not to incentivise new products and research, innovation and technology?

Photo of Gregory Barker Gregory Barker The Minister of State, Department of Energy and Climate Change

In general terms, subsidising at scale a new range of products—such as solid wall insulation or window treatment—designed to treat fuel-poor homes will give rise to support for a range of products that can perhaps be fitted in a complete development. When that learning is captured and the product is developed and manufactured at scale, or there is a large order, benefits will accrue throughout the supply chain.

Photo of Huw Irranca-Davies Huw Irranca-Davies Shadow Minister (Energy and Climate Change)

The Minister’s clarification is helpful. As other members of the Committee have made product placements, I will, too. Rockwool in my consistency generates hundreds of jobs and provides a good wall insulation product. According to the Minister, it could bring forward a new product specifically for households that might benefit from the ECO. It could make a claim on the ECO pot of money to develop it and bring it to market.

Photo of Gregory Barker Gregory Barker The Minister of State, Department of Energy and Climate Change

Obviously, we are talking in broad terms. It would not work with a small number of homes, but Rockwool could work on a project where it is retrofitting a large number of fuel-poor homes. If it were identified that it would be useful to work with a particular product for a type of property that was common across a large number of fuel-poor households, that intervention could be subsidised. The knock-on effect would mean that the scale, the learning and the product development would not be lost, but benefit the wider product development and range, and continue to bear down on the cost of the products. Many solid wall products, in particular, have not come down in price as quickly as we would like, because of a chicken-and-egg situation. However, once we start to invest in them at scale and see orders come forward, albeit specifically in response to dealing with problems of the fuel-poor, the benefits will accrue right across the sector.

Photo of Caroline Lucas Caroline Lucas Leader of the Green Party

Would not that scheme run better if it were driven by demand rather than supply? If the Minister wants to stimulate innovation, surely the way to do it is to ensure that a lot of ECO money goes to the many houses needing solid wall insulation. Once there is demand, that will drive innovation and get costs down. It seems perverse to do it the other way round, if that is also at the expense of giving scarce resources to those homes more directly.

Photo of Gregory Barker Gregory Barker The Minister of State, Department of Energy and Climate Change

Let me make it clear that we are not giving direct support for research and development; that is not the role of the ECO. However, the ECO could support specific measures in homes. Projects could identify the need for specific measures at scale purchase either through a green deal provider acting across a range of similar properties, or through a local authority that, as a green deal provider, signs up to improve many similar properties as part of a co-operative—in other words, has a sufficient volume of similar homes with similar problems to find it worth while to work with a supplier on a specific contract for specific insulation products.

Doing that would incentivise the supplier—for example, the company in the constituency of the hon. Member for Ogmore—to invest in that product; to come forward with a cheaper production price; to invest in research and development and in product development, and to create something which, in relation to product specification and price, better fits the needs of the fuel-poor. However, the resulting learning and economies of scale will benefit everyone else in the supply chain who might benefit from such an intervention, regardless of whether they are fuel-poor. The ECO will have the ripple effect of driving market development which, in turn, will help those—not necessarily the fuel-poor but those with hard-to-treat homes—who could benefit indirectly from such treatments.

Photo of Huw Irranca-Davies Huw Irranca-Davies Shadow Minister (Energy and Climate Change)

It may be only me, but that seems to be a slightly new departure in the use of the ECO. There might be great logic to it, but I am still struggling to understand whether there is a direct draw for companies, which may be good or bad, on the limited pot of money for the ECO. Will the Minister write to all the members of the Committee at the weekend to outline his thinking? It might be a fantastic innovation, but we are worried about the draw on what he has described as a very limited pot of money.

Photo of Gregory Barker Gregory Barker The Minister of State, Department of Energy and Climate Change

I am happy to do that. To be clear, I am not talking about using the ECO for supply-side subsidies, so that is not a departure; I am simply saying that the Committee should think more widely than the binary choice about whether the ECO will subsidise only the fuel-poor and not hard-to-treat homes, which are part of the same insulation product economy.

We are talking about driving market demand but, wherever it comes from, that demand will impact positively on the whole supply chain. The ECO will bring scale to a sector that, to date, lacks investment commensurate with the size of the challenge, and it will drive down costs. The opportunity for co-operatives and local community groups, in particular, to use their purchasing power smartly, rather than just on an individual house-by-house basis, will have a more punchy effect in driving innovation and bringing down costs.

Photo of Luciana Berger Luciana Berger Shadow Minister (Energy and Climate Change)

I appreciate and accept that those matters are not mutually exclusive, as do some of my hon. Friends. However, we want the ECO to reach fuel-poor households. We accept that millions of people are both fuel-poor and live in homes that are hard to treat, but the ECO should not go to people who live in homes that are hard to treat but who are able to pay. Will the Minister directly address that point? Does he believe that people in the able-to-pay sector should benefit from the ECO simply because they have hard-to-treat properties?

Photo of Gregory Barker Gregory Barker The Minister of State, Department of Energy and Climate Change

The bottom line is, does the hon. Lady think that we should not aim to bring the whole housing stock up to the standard that is needed to meet our climate change obligations? That is the flip side of what she has said.

Photo of Tom Greatrex Tom Greatrex Shadow Minister (Scotland) 1:30 pm, 16th June 2011

I am not sure that that is what my hon. Friend the Member for Liverpool, Wavertree meant and it is certainly not what I meant in my contribution, which was about priority and where we start. As the Minister said, the programme might last 10 years, and £20 billion might be spent over that time frame, during which we might be able to improve some hard-to-treat properties in which the inhabitants are not fuel-poor. However, many people are fuel-poor and some of them live in hard-to-treat homes. Surely they should be the priority.

Photo of Gregory Barker Gregory Barker The Minister of State, Department of Energy and Climate Change

That argument is rather more nuanced than the one that the hon. Member for Liverpool, Wavertree advanced. We must be clear that a very specific climate change carbon agenda is at the heart of the green deal and the ECO; it is not simply a fuel poverty measure. Those two are not mutually exclusive, but we will not take a doctrinaire view of the ECO that might have the effect of hamstringing our ability to meet our carbon targets. Undoubtedly, we must be pragmatic in how we roll out the scheme. We are concerned about meeting a fuel poverty agenda, but we are equally concerned to drive down carbon emissions.

We know what will happen if we simply leave it to people voluntarily to choose to lower their carbon emissions: many will not do it. That is the experience from the insulation measures. We must do the whole  thing, and within it, we can drive an aggressive war on fuel poverty. We will ensure that, wherever possible, we address the fuel-poor issue, which will have a strong priority, but I do not agree with the Opposition’s view that we should abandon the carbon reduction element of the programme.

Photo of Ian Lavery Ian Lavery Labour, Wansbeck

To suggest that the view of the Opposition is doctrinaire is absolute nonsense. We are suggesting that we focus on fuel poverty. An estimated 44,000 people a year die as a result of cold properties. Does the Minister not agree that we should prioritise those homes through the ECO before we put any more finances into properties in which people are living comfortably?

Photo of Gregory Barker Gregory Barker The Minister of State, Department of Energy and Climate Change

I am sorry, but that is being doctrinaire. We know about fuel poverty, because it increased by 2 million people during the past four years under the previous Government. We know that the matter is extremely serious, which is why we will have a strong focus on it. Unlike the carbon emissions reduction target programme that we inherited from the previous Government, the scheme will not be vague or woolly; it will have a strong fuel poverty focus, hence the diagram—[ Interruption. ]

Photo of Gregory Barker Gregory Barker The Minister of State, Department of Energy and Climate Change

No, I shall finish if I may. For the first time, the fuel poverty and climate change agendas are being brought and meshed together. I do not see those as mutually exclusive, but I return to the point that we have an imperative to meet our climate change targets. Reducing carbon emissions from the built environment is not something that we can put off until we have defeated fuel poverty. We will manage the programme pragmatically and we will focus on fuel poverty, but there is an important climate change element to it. We are not talking about insulating Blenheim palace or ridiculously large homes at a disproportionate cost.

Photo of Ian Lavery Ian Lavery Labour, Wansbeck

The Minister has mentioned huge, valuable properties. Will such properties not be able to apply for the ECO?

Photo of Gregory Barker Gregory Barker The Minister of State, Department of Energy and Climate Change

No, additional criteria that will be introduced in secondary legislation will apply to properties of people who want to spend more than £10,000—there will be a permeable ceiling. We have spoken generally to give the consumer some context of the scale of interventions in the average household. We have said that they should have an entitlement, or an expectation, of a reasonable spend of up to £10,000. We fully accept that there will be exceptions to that rule—either larger homes that have larger heating bills, which means that it makes sense that they can afford a bigger intervention, or homes with a need to spend more. That may be through the paid-for-through-savings model, if a household is able to pay for it, or it may be from the ECO. However, we will have to be pragmatic and ensure that we do not ignore climate change.

Photo of Caroline Lucas Caroline Lucas Leader of the Green Party

The Minister has said in the past that he is a reasonable person, and he is. I therefore find it hard to understand why he appears to be saying that if we are tackling fuel poverty, somehow we are not tackling climate change. To me, the two things come together beautifully, and they could do so with the ECO. For example, if we have two properties that are both hard to treat, in one of which there is a fuel-poor family and in the other an able-to-pay family, the environment does not care which one we insulate first. As long as the emissions come down, it does not matter what position the family inside is in. However, if we as politicians say, “Let us combine the environmental and social agendas by prioritising properties that have the fuel-poor in them,” surely that is a gain for both the environment and the social side.

Photo of Gregory Barker Gregory Barker The Minister of State, Department of Energy and Climate Change

That is exactly what we are doing. The hon. Lady articulates our point entirely. However, there may be cases where it makes good sense to offer some form of subsidy, through the ECO, to the average home owner who is not fuel-poor, but who lives in an older or difficult-to-treat building. Someone on average earnings, or even on below-average earnings, but who does not meet the narrow definition of “fuel-poor”, should be entitled to some additional help to treat their home to bring it up to a standard that will help us meet our climate change targets. That is what the ECO is designed to do. It is not just about eliminating fuel poverty.

We must remember that when dealing with the fuel-poor, in some cases, the consumption of energy can go up. The rebound effect of the fuel-poor is disproportionately larger than that of a typical household. Often, what we are talking about in dealing with fuel poverty is installing heating systems and raising the warmth of the home. Obviously, we are looking to do that in a much more efficient thermal envelope, but we are not necessarily talking about making the same level of carbon savings as we would in another household.

Photo of Caroline Lucas Caroline Lucas Leader of the Green Party

An able-to-pay household may take the savings off its bill to jet off to the Caribbean three times a year. The idea that insulating a fuel-poor household that would benefit from thermal comfort would be worse for the environment than whatever an able-to-pay family might do with the money saved from its fuel bills, which may go on iPads, widgets, aviation and all kinds of carbon-intensive things, does not seem to be backed up with any evidence.

Photo of Gregory Barker Gregory Barker The Minister of State, Department of Energy and Climate Change

I do not suggest that there is hard evidence, because the situation will change. However, general economic analysis suggests that the rebound effect is typically about 15% in an average family, and up to 40% for the fuel-poor. I gave evidence to the House of Lords European Union Sub-Committee on the EU energy efficiency framework to that effect. Those figures are generally accepted. Any general theory is of course open to all sorts of exceptions, but I do not think that I am saying something controversial.

I am not talking about people who can fly off to the Caribbean three times a year, but about average families—people who simply do not fall into the category of fuel-poor, or our typical constituents, who certainly do not fly to the Caribbean three times of year. Many  people in my constituency do not consider themselves wealthy, are not in the higher tax bracket and certainly do not fly to the Caribbean three times a year. However, it would be a bit of a struggle if they did not have any help with retrofitting their home to a decent standard that would allow us to keep on track to meet our carbon reduction targets. We need some flexibility here, and if we make the ECO about the fuel-poor only, we will risk undershooting and not achieving our climate change target, which is an important objective. If the hon. Member for Liverpool, Wavertree is saying that that is no longer Labour policy, that is an important departure.

Photo of Huw Irranca-Davies Huw Irranca-Davies Shadow Minister (Energy and Climate Change)

In what has been a broadly consensual meeting of minds, I think there is a real point of difference here. How will the Minister respond to the concerns not only of the Committee, but of that troublesome priest, Consumer Focus? It states:

ECO resources should not subsidise ‘able to pay’ consumers taking advantage of the Green Deal finance mechanism”— this is in respect of the ECO—

“other than those in hard to treat housing, since this will reduce its ability to tackle fuel poverty. The proportion of resources going to able to pay consumers in hard to treat homes must not undermine the ‘ring-fenced’ element for low income consumers”.

How will the Minister respond to that with a pot of money that he has repeatedly described as being finite and restricted? We need to make it go further, and he is arguing against the very spirit of that.

Photo of Gregory Barker Gregory Barker The Minister of State, Department of Energy and Climate Change

Not at all. I would be entirely in agreement. We will come forward in secondary legislation with a sensible and pragmatic approach, but we will not exclude ordinary, hard-working, average-earning families from support to help them improve their homes simply because they do not fall into the quite narrow definition of fuel-poor. If that is what the hon. Member for Ogmore is saying, we are in agreement with that.

It is important to remember that, alongside poverty objectives, the ECO is designed to maximise access to the green deal, and the more green deal finance we can leverage in, the better it is for us all. The ECO is a further measure, not an either/or. It is designed to trigger investment in homes, and a small element of the ECO in an able-to-pay household will quite often trigger further investments that would not otherwise be made. It is a way of leveraging in additional finance.

The hon. Gentleman and the hon. Member for Liverpool, Wavertree are painting an unnecessary division between the fuel-poor and ordinary, hard-working families. Such families may not meet the definition of fuel poverty, but they would nevertheless struggle to afford the currently relatively high cost of interventions on an average British semi-detached, terraced or small family house, because they could not fund that entirely through the pay-as-you-save model. It is important that the green deal is seen to be offering something extra to those homes.

Other models that the Opposition have mentioned, such as Germany, where a different type of subsidy for loans is used, have been subsidising average families. We are not discussing subsidies for the super-rich. We are trying to make the measures available, practical, simple and straightforward for ordinary working families. We need to get beyond simply shoving some lagging in the loft. We are discussing a comprehensive retrofit programme,  not just a few basic measures. To do that and to meet our climate change targets means that some families—perhaps the hon. Member for Ogmore could define what he means by rich or well-off—and certainly ones that I know of, could warrant that sort of support.

Photo of Huw Irranca-Davies Huw Irranca-Davies Shadow Minister (Energy and Climate Change)

Could I suggest to the Minister that hard-working, low-income families in my constituency would perfectly accept and support the principle that the bulk of the ECO is directed towards people who are living in real fuel poverty?

Photo of Gregory Barker Gregory Barker The Minister of State, Department of Energy and Climate Change

The hon. Gentleman is changing his words again. We have gone from “only fuel-poor” to “the bulk of”. If he is simply saying “the bulk of”—I am not quite sure how that is defined—we are really not far away at all. That is pretty much where we came into the conversation. The shift—it is important that we flesh such things out—is that he and his colleagues have previously said that 100% of the ECO should go to those in fuel poverty. That is the point I am contesting.

Photo of Alan Whitehead Alan Whitehead Labour, Southampton, Test 1:45 pm, 16th June 2011

What I attempted to make clear in my earlier contribution, which I hope the Minister will take on board, is that it is inevitable that the ECO will be rationed for the reasons the Minister gave and that I put forward in my comments. If the ECO were not rationed, it would be perfectly reasonable to say that the bulk of the money in an ECO programme should go to the fuel-poor and for the Minister to make the point about action on fuel poverty being linked to action on climate change and improvements to people’s property generally.

However, because we know that the ECO will be fundamentally rationed over the next period, the issue is how to prioritise what is the best outcome for the ECO overall. The best outcome would be to combine action on fuel poverty and action on climate change. It would not be the best outcome if the ECO were not rationed because the sort of circumstances that the Minister describes would rightly come into play, and everyone who would benefit from having their home uprated would have an ECO. However, I am afraid that that will not be the case. I am sure that the Minister is working very hard to ensure that the ECO is as large as it can be, but we know that it will be rationed. That is the fundamental point being made here.

Photo of Gregory Barker Gregory Barker The Minister of State, Department of Energy and Climate Change

Obviously, when we introduce secondary legislation, having engaged widely with stakeholders on a genuinely complex area, we will endeavour to steer our way through these issues. I am being drawn here, but I am trying to be clear about the matter. Opposition Members seem to be suggesting—although this seems to change in their interventions—that the ECO should be exclusively for the fuel-poor. I know that the hon. Member for Southampton, Test is not saying that, but other hon. Members have said in interventions that it should be exclusively for the fuel poor or “not for the able to pay,” which I think is what the hon. Member for Liverpool, Wavertree said. If it is not for the able to pay, that is the same thing as being exclusively for the fuel-poor. That is not semantics; it is just the basis of what she said.

I agree with the hon. Member for Southampton, Test. Our focus must be on trying to do as much as we can for the fuel-poor. I would be hesitant to put a figure on that, but it could be anywhere from 51% to 100%. The bottom line is that in order to meet our climate change targets, we have to tackle solid wall insulation. The reality is that the able-to-pay customer will not, at this point in time, shell out for solid wall insulation in large numbers. We know that because we have undertaken a great deal of research. The hon. Gentleman is an expert, so he will know exactly what we do. There is a market failure there. If we ignore that and focus exclusively on the fuel-poor—the bottom element in society—we will not meet our climate change targets. We are perhaps not as far apart on the matter as we thought we were at the beginning. I must make it clear that we have twin objectives, not one.

Photo of Caroline Lucas Caroline Lucas Leader of the Green Party

This has been an important debate. It would be dangerous to conclude from our discussions that we would prefer not to use the ECO exclusively in fuel-poor households because we are afraid that those households will heat their homes more fully to be more comfortable and they will therefore generate more climate change emissions. We cannot tackle climate change by keeping the fuel-poor in fuel poverty. If this scheme is not the right way to deal with that matter because, as we are discussing, households may use more energy as a result of insulating their homes better, we need to look at a range of other tools to tackle climate change. I am deeply worried that the tenor of the argument seems to suggest that because we are worried that emissions will rise, we will not do as much as we could for fuel-poor households.

Photo of Gregory Barker Gregory Barker The Minister of State, Department of Energy and Climate Change

That is a travesty of what I said. I absolutely did not say that. The hon. Lady sought to draw me on the impact of the rebound effect. That is not the purpose of our policy. Let me make it absolutely clear. The purpose of our policy is to tackle fuel poverty, and we will make a much better job of it than previous Governments have been able to. However, to tackle fuel poverty and our climate change objectives, we must tackle solid wall insulation, and that is relevant only partly to the fuel-poor.

Large swathes of normal, average housing in typical constituencies are occupied by people who by no stretch of the imagination are those that the hon. Lady is trying to caricature as taking three holidays a year in the Caribbean. They may be teachers, nurses, public sector workers, and people who work in supermarkets. They may not be fuel-poor, and they might be insulted if it were suggested that they were in a position to take three holidays a year. Some people who do not fall into fuel poverty will need help to make their homes fit the sort of standard that the hon. Lady and I know must be achieved if we are to transform the UK’s building stock to meet our climate change objectives. She cannot expect our climate change objective to be met by providing subsidy only to the fuel-poor. There is a grown-up, pragmatic balance to be struck, and I am confident that we will be able to do so through secondary legislation.

Photo of Claire Perry Claire Perry Conservative, Devizes

I am encouraged by what Minister says. We are all worried about fuel poverty, but the debate seems to be going down the path of  dogma rather than pragmatism. He gave examples of where there might be a case for subsidy for a large housing scheme, or multiple houses, especially those with solid walls, which is a problem that I recognise in my constituency. It might be helpful if he could point the Committee to practical examples of where such an attempt has been made and failed, and where a market mechanism-changing device, such as the ECO subsidy, could help. That would certainly reassure many hon. Members.

Graham Jones (Hyndburn) (Lab) rose—

Photo of Graham Jones Graham Jones Opposition Assistant Whip (Commons)

I reject that dogma. I said earlier that 60% of the housing stock in Hyndburn is terraced. Will the Minister clarify what he means by solid wall insulation? It is a great problem in my constituency, where people move in and out of work. How does he expect the green deal and the ECO to work, given that 60% of housing stock in my constituency is terraced, and occupied by the sort of people he describes? Will he clarify that?

Photo of Gregory Barker Gregory Barker The Minister of State, Department of Energy and Climate Change

That is a helpful example. If several streets of similar terraced properties in the hon. Gentleman’s constituency needed solid wall insulation, it would make real sense to do the whole lot at once. That would be much more effective. The Opposition are suggesting—

Photo of Gregory Barker Gregory Barker The Minister of State, Department of Energy and Climate Change

The hon. Gentleman is not, but some Opposition Members are suggesting that we go down the street deciding who is fuel-poor. We would end up with a patchwork approach whereby hard-working families who are not unemployed and do not strictly fall into the fuel poverty trap would be denied the upgrade that those next door were being offered.

Photo of Graham Jones Graham Jones Opposition Assistant Whip (Commons)

I raised that point several sittings ago, and did not receive an answer. It is good to be fleshing out an answer now, but it has taken several sittings. I would like the Minister to continue, and to provide more details of how the provision will work.

Photo of Gregory Barker Gregory Barker The Minister of State, Department of Energy and Climate Change

Well, I was doing that when the hon. Gentleman interrupted me. I thank him for his encouragement. He has identified exactly how we anticipate the ECO blending into a community roll-out scheme so that it would benefit the fuel-poor, and also other families who live in similar houses. A family may live next door to people who are not working, who live next door to a single mother, who lives next door to a family with four working people, who live next door to a widow with a half-decent occupational pension. They may all live in a relatively non-affluent area and not take three holidays a year in the Caribbean, but only some would fit into the strict definition of fuel poverty. It would be sensible, particularly if there was a community group, to offer them the opportunity for subsidy. The ECO could play an important role in a community-based solution and blending in the cost.

Photo of Huw Irranca-Davies Huw Irranca-Davies Shadow Minister (Energy and Climate Change)

I fully agree with the Minister. I shall describe a scheme to tackle fuel poverty that takes a spatial approach, area by area, that has economies of scale. It is called CESP—the community energy saving programme. It is already in place. In effect, the Minister is building on CESP and giving the ECO a spatial planning dimension. We fully support it, and nothing that we have said rules it out. However, we are against the finite pot that he continually stresses to the Committee should be disbursed to those who might be able to afford to do it themselves as and when he secures more money from the Treasury. Seeking carbon reductions and tackling fuel poverty together requires a degree of targeting, including in the spatial approach that he describes.

Photo of Gregory Barker Gregory Barker The Minister of State, Department of Energy and Climate Change

The hon. Gentleman is dancing around the subject. He says one thing in Committee and another on a blog. We are talking about allowing the ECO to be deployed in community-based schemes, so that whole streets and communities can be done; in that way, it will be most forcefully deployed.

People should not be picked out on fuel poverty alone. For example, Birmingham and Coventry city councils—I met the latter recently—aim to do their whole housing stock, but they can achieve that only by doing large groups of neighbourhoods together. That is exactly the sort of street-by-street roll-out that we want. However, it cannot be done if councils say, “Your neighbour’s getting solid wall insulation. We know that you only earn £2,000 a year more, but you don’t qualify for the fuel poverty definition so we can’t offer it to you.” It is about being inclusive and fair, and recognising that many hard-working families need help with insulation and not only the most fuel-poor. In the long run, it makes economic sense to cover the housing stock in that way; it is good economics as well as being fair.

Photo of Ian Lavery Ian Lavery Labour, Wansbeck

I do not want to dance around the issue, but I ask the Minister to consider one simple factor. Are we not missing a golden opportunity as a Committee to help the 44,000 people who die every year, given that the ECO could perhaps prevent people from dying in future? Should we not be discussing that? Instead of just talking about the fuel-poor, should we not be looking to introduce legislation so that as well as the ECO meeting its objectives to target emission reductions it could save people’s lives?

Photo of Gregory Barker Gregory Barker The Minister of State, Department of Energy and Climate Change

I agree with the hon. Gentleman, but we should put it in context. Successive Governments have pledged in good faith to tackle fuel poverty. However, under the five years of the previous Administration the number suffering it increased by more than 2 million. It is simplistic to say that we could stop 44,000 people dying in cold homes. I agree with the hon. Gentleman that it pulls at the heartstrings, but the solution is rather more complex. If it was not, I dare say that the last Labour Government would have bequeathed us a rather better record on fuel poverty. It is not that they did not share the hon. Gentleman’s passion for helping those 44,000 people, but the reality is a lot more complex.

We are on the same page in wanting to tackle fuel poverty. We are coming forward with a programme that is designed to meet our climate change objectives and also to help with fuel poverty. It has the means to do so,  and the means will be commensurate with the scale of the challenge—not since whenever, but for the first time. I will not be drawn down a road that artificially puts a premium on the fuel-poor and excludes those who might be just over the definition boundary but who live in comparable housing. We should be sensible enough and broad enough to do that together.

Photo of Caroline Lucas Caroline Lucas Leader of the Green Party 2:00 pm, 16th June 2011

I recognise that hard-working families need help, too. For the record, my reference to people taking Caribbean holidays was more or less in the same category as the Minister’s referring to people living in Blenheim palace: it was for illustrative purposes and should not have been taken too literally. My point, however, was whether there will be any indication in secondary legislation about how the Government plan to allocate money within the ECO. We have had a big discussion about that this afternoon. Will there be some notional figures that give us a sense of how much of that money will be directed to the fuel-poor, rather than being used in the other ways that the Minister has described? We are all driving at a real prioritisation for the fuel-poor, and we can debate that definition—whether it is 100%, 90% or 80%—but can we look forward to that information in secondary legislation?

Photo of Gregory Barker Gregory Barker The Minister of State, Department of Energy and Climate Change

Yes, absolutely. This will be a complex proposition to try to navigate our way through a range of different scenarios. It is not only a choice between a rich man in his castle and the fuel-poor. We can think of lots of different scenarios from our constituencies, let alone right across the country. We must work not only with stakeholders, but with other groups who have a legitimate viewpoint that they want to feed into the consultation, so that, at a later stage, we come up with a complex, detailed analysis and solution relating to how we will get through those difficult areas. We want to reach exactly the destination that the hon. Lady describes, but it will involve a pragmatic blending of climate objectives, carbon reduction objectives and objectives relating to the fuel-poor, while, at the same time, being clear that we have long-term goals to meet.

Photo of Luciana Berger Luciana Berger Shadow Minister (Energy and Climate Change)

The Minister said that the Government will not put a premium on the fuel-poor, but he has previously said that the green deal and the ECO will be a game changer for fuel poverty. We will no longer have Warm Front, CERT or CESP; this will replace all those. In my estimation, 2 million of the 7 million solid-wall homes are households in fuel poverty. The whole ECO pot, if we get the £20 billion, would help only those 2 million households, and there would be nothing left. By National Energy Action’s estimates, there would still be 3.5 million homes in fuel poverty, if the ECO is solely targeted at homes that are both fuel-poor and hard to treat. That is why the amendment has been tabled and why we seek the Government’s support.

Photo of Gregory Barker Gregory Barker The Minister of State, Department of Energy and Climate Change

Let us be clear: I did not say that I would not put a premium on the fuel-poor—full stop. I said that I would not put a premium on the fuel-poor to the exclusion of every other category, particularly those who might be just outside the definition of fuel-poor. Our approach has to be pragmatic. I suggest that the hon. Lady does not try to parse my words to seek some  artificial definition. We are absolutely committed to tackling fuel poverty. Compare it with what came before: the hon. Lady is speaking for a party who, after 13 years in office, has to defend a record that left 4.5 million people in poverty. Let us be clear about that. That figure went up by 2 million people in the final five years, after the previous Government had been in office for eight.

Photo of Gregory Barker Gregory Barker The Minister of State, Department of Energy and Climate Change

I will try to move on now. There are no easy solutions.

Photo of Gregory Barker Gregory Barker The Minister of State, Department of Energy and Climate Change

I know why, because the hon. Gentleman and other Labour Members were party to a Government that failed to tackle that problem. They could have proposed the green deal and the ECO in the previous Parliament, but they chose not to. They could have proposed large at-scale solutions, but they chose not to. They decided to rely on the Warm Front scheme. If we had carried on with that, it would have been 80 years before fuel poverty was eradicated. It was absolutely up to Labour Members during their 13 years in government to make game-changing proposals that would have anticipated dealing with fuel poverty, carbon emissions, and the housing stock at the same scale as the Bill intends. In the first year of our coalition Government, we are introducing that game-changing legislation. They had 13 years, but they failed to crack it.

I realise that we are all moving forward together now. We are not trying to fight old battles; we are trying to build a consensus. Let us not try to build artificial divides that suggest that the Government are not concerned about fuel poverty. We will be judged on fuel poverty on our record and not only on our rhetoric. We are doing our best in the Bill to tackle the twin objectives of ensuring that we meet the climate change imperative and doing something transformational for the fuel-poor, albeit within the context of also having to deal with the record deficit that we inherited.

I move on to new clause 39. The Government are of course focused on the importance of our energy efficiency goals, but the hon. Member for Brighton, Pavilion and my hon. Friend the Member for Richmond Park will not be surprised to hear me say that the Treasury is responsible for the allocation of public funds. A duty on the Secretary of State to report on potential uses of central Government revenues would conflict with the Treasury’s responsibilities. We also have 300 years of prejudice against hypothecation to contend with. My hon. Friend raised the excellent example of the landfill tax, and I urge him to remind the Chancellor of the Exchequer of that when he next has the chance to talk to him. My hon. Friend made those points well, but we cannot include them in the Bill—not if I want to keep my job, at any rate.

None the less, the Committee’s support for the prioritisation of energy and climate change is fully appreciated, and the Committee can be confident that those issues remain high on the Government’s wider  agenda. I refer my hon. Friend to the words of the Chancellor of the Exchequer in the most recent Budget, when he spoke about the need to bring forward incentives and other fiscal instruments that will help drive and support the programme. On that basis, and knowing how committed the coalition Government are to this flagship agenda—we are going to will not only the end but the means, to ensure that it is successful—I hope that the hon. Members for Liverpool, Wavertree and for Brighton, Pavilion will be content to withdraw the new clauses.

I will now outline the central purpose and effect of clause 64. It amends the Secretary of State’s existing powers and provides flexibility over how to design a future ECO. The new powers allow the Secretary of State to set out the basic structure of the scheme; for example, it might be focused on those who are most in need of assistance by requiring the companies concerned to provide support to specific groups of people, types of property or homes in specific areas, and by setting out what sorts of measures will be included and how they will be scored.

The clause also inserts a power for the Secretary of State to appoint a body other than Ofgem to be the administrator of the scheme. Indeed, the Secretary of State may appoint himself to be such an administrator. The future ECO is a key component of our overall strategy for domestic energy efficiency. The clause builds on existing legislation and the experience of existing schemes to enable us to create an obligation that ensures a step change in our approach to energy efficiency.

Photo of David Crausby David Crausby Labour, Bolton North East

We will not be voting on the new clauses at this point, but it would be useful to know whether the movers of new clause 23 and new clause 39 want to press those to a vote at the appropriate time.

Question put and agreed to.

Clause 64 accordingly ordered to stand part of the Bill.

Clauses 65 to 67 ordered to stand part of the Bill.